Indian ETFs Set to Soar After US Pledges to Cut Tariffs to 18%

On Feb. 2, 2026, a long-awaited breakthrough was announced as the United States promised to slash its reciprocal tariffs on Indian goods from a peak of 50% to 18% following the signing of a landmark trade deal by U.S. President Trump and his Indian counterpart, Narendra Modi. This announcement triggered an immediate surge in India's financial markets, with the benchmark Nifty 50 index soaring 3% after jumping as much as 5%, while the rupee strengthened by 1%. 

Market experts hailed the trade pact as “unequivocally positive” and expect it to act as a major growth catalyst for Indian exchange-traded funds (ETFs), as it removes the “tariff overhang” that had led foreign investors to pull nearly $12 billion out of India since late 2025.

Before suggesting a few Indian ETFs that have already gained from the tariff reduction announcement and may rally further in the coming days, let us delve deeper into the specifics of the deal and the industries that stand to benefit, so you can make an informed decision.

New Tariff Framework & Key Beneficiaries

The latest U.S.-India deal slashes punitive reciprocal tariffs on Indian goods from a peak of 50%, which included an additional 25% duty imposed over India’s purchases of Russian crude, to a flat 18%. In exchange, India has committed to "Buy American," targeting to invest $500 billion in U.S. energy, agriculture, technology, and coal products by 2030, while phasing out Russian oil imports.

The most immediate beneficiaries are high-export industries like IT Services, Textiles & Apparel, Pharmaceuticals & Chemicals, Automotive & Engineering, where margins were previously impacted owing to the 50% tariff imposition. 

To this end, it is important to note that the United States has long been a key export destination for Indian-made goods, and following the U.S. tariff hike in late August, sectors such as textiles, jewelry, and shrimp were adversely impacted (as mentioned by Reuters). 

Now, with the tariff reduction, industries associated with these products should benefit. Notably, the Federation of Indian Export Organisations (“FIEO”), a lobby for exporters, said the cut in U.S. tariffs to 18% should significantly boost Indian exports, including textiles and apparel, pharmaceuticals, chemicals, footwear, jewellery, and food items like shrimp, putting them on par with Asian peers, such as Vietnam and Bangladesh.

As a result, Indian companies from the aforementioned industries that trade on the New York Stock Exchange (NYSE) and are likely beneficiaries of the latest tariff reduction include Reliance Industries, an exporter of petroleum and textile products to the United States; Infosys, an exporter of IT services; Cipla, a major exporter of pharmaceutical products; and Larsen & Toubro, a significant exporter of engineering equipment.

ETFs holding these companies stand to gain substantially from the aforementioned tariff reduction.

What Lies Ahead for the Indian Equity Market?

Thanks to this tariff reduction, the outlook for Indian equities has shifted from "cautious" to "bullish."

As witnessed last year, the Indian stock market struggled notably due to these tariff impositions by Trump. However, as per a September 2025 report, JP Morgan Asset Management expects India to continue to be the fastest-growing major economy globally, with the nation’s real gross domestic product (GDP) anticipated to grow slightly below 7% annually over the next three years. 

JPMorgan analysts have also projected the Nifty 50 to reach the 30,000 mark by the end of 2026, implying a roughly 15% upside from last November’s level. With tariffs now reduced to 18%, India’s equity market could potentially advance beyond the 30,000 level, supported by a stable macroeconomic backdrop and a return of foreign capital.

Indian ETFs to Gain

The recent development, as mentioned above, makes the following Indian ETFs particularly attractive for those looking to capture the anticipated liquidity wave in India’s stock market:

iShares MSCI India ETF INDA

This fund, with net assets worth $9.21 billion, offers exposure to 165 large and mid-cap Indian companies. Its top 10 holdings include Reliance Industries (6.22%), Infosys (4.00%) and Larsen & Toubro (1.94%). 

INDA has gained 3% following the trade deal announcement. The fund charges 61 basis points (bps) as fees.

WisdomTree India Earnings Fund EPI  

This fund, with total assets worth $2.61 billion, provides exposure to 557 profitable companies in India’s equity market. Its top 10 holdings include Reliance Industries (7.02%) and Infosys (4.08%). 

EPI has risen 3% following the trade deal announcement. The fund charges 84 bps as fees. 

iShares India 50 ETF INDY

This fund, with total assets worth $621.1 million, provides exposure to 50 of the largest Indian stocks. Its top 10 holdings include Reliance Industries (8.15%), Infosys (4.97%) and Larsen & Toubro (3.99%).  

INDY has rallied 2.8% following the trade deal announcement. The fund charges 65 bps as fees.

Franklin FTSE India ETF FLIN

This fund, with total assets worth $2.82 billion, provides exposure to 276 large and mid-cap companies in India. Its top 10 holdings include Reliance Industries (6.03%), Infosys (3.65%) and Larsen & Toubro (1.68%).  

FLIN has risen 2.6% following the trade deal announcement. The fund charges 19 bps as fees.

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This article originally published on Zacks Investment Research (zacks.com).

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